CORP WEEKLY: First full week of 2025 sees flood of issuance

Having sat out the first shortened-week of 2025, IG corporate issuers got the new year underway with a bang this week as 15 names made euro funding plays despite continued angst in broader markets over a mixture of inflation and fiscal worries.

The first batch of names printed a combined 19 tranches worth EUR12.95bn, in what was the sector’s biggest volume week since the w/e 15-Nov (EUR17.95bn).

That meant we beat the average supply estimate of EUR10.5bn given by participants in our weekly issuance poll last Friday, but fell short of the most opportunistic forecast of EUR15bn.

This week’s tally was even more impressive given that there was no supply on Monday amid the Epiphany Day holiday on parts of the continent, nor on Friday amid the distraction of a headline US payroll print.

IG corporate names contributed to what was the second biggest week ever for single currency supply at EUR101.7bn across all asset classes, having only been beaten by the all-time high of EUR112.445bn recorded in the corresponding week last year.

Issuers secure economic funding

Investors were treated to variety this week, with issuers from a range of jurisdictions out across the euro vanilla, green, sustainability-linked and hybrid formats.

That variety and keenness from investors following the recent paucity of supply (last corp deal of 2024 was 9-Dec) resulted in this week’s issuers seeing some strong demand where orders for the EUR12.95bn on offer finished up at an impressive EUR44.75bn, giving a final average cover ratio of 3.69x.

However, continuing a theme seen toward the end of last year, some orders dropped out the books as investors put up a bit of resistance to tighter pricing levels.

Combined demand had earlier peaked at an eye-watering EUR57.5b, but some interest was pared back after the week’s corporates cut pricing an average 38.92bps from IPTs to reoffer.

That resulted in economic funding for the first batch of borrowers this year though where the average NIC paid was under 1bp (0.94bp) and with a number of names printing inside fair value valuations.

Lots to talk about

The IG corporate bond market was slower than other sectors to get underway in the new year, but certainly got up and running on Tuesday with a six name/nine tranche euro flurry worth EUR6.85bn.

This marked the latest start to the year for euro IG corporate supply since 2020 when the first deals of the year were also on the 7th of Jan.

In an impressive start to 2025, the trades saw plenty of interest where combined demand for the EUR6.85bn of euro paper on offer finished at EUR23.6bn.

Automakers were once again amongst those to kick off the year’s euro corporate bond activity as three came out including RCI Banque (EUR850m 3yr; 3.9bn bk & 7bp NIC) which has now opened up supply in eight straight years.

RCI was joined by automaker peers General Motors Financial Company (EUR850m 6.5yr; 2.9bn bk & 3bp NIC) and TRATON (EUR700m 3yr / 500m 6yr two-part; jt-bks 5.4bn & 5/8bp NICs), whilst making up Tuesday’s sextet of corporate names were Nestle (EUR600m 7yr / 500m 10yr two-part; jt-bks 4.9bn & 2/2.5bp NICs), Digital Dutch Finco (EUR850m long 10yr; 2.3bn bk & -2bp NIC) and Enel (EUR1bn PNC5.25 / 1bn PNC8 two-part hybrid; jt-bks EUR4.2bn).

The latter opened up 2025’s hybrid market with aplomb with the trades landing with NICs of zero and -12.5bps respectively, although it was noticeable that tight pricing saw combined final demand tumble to EUR4.2bn from a peak of EUR7.15bn.

More hybrid paper came on Wednesday via Lufthansa (EUR500m 30NC6) which emerged from the pipeline along with Evonik (EUR500m no grow 5yr green), whilst more green paper came from opportunistic borrower Hera Spa (EUR500m 6.5yr).

Peak combined demand for the EUR1.5bn on offer on the day was strong at EUR8.5bn, although it was again noticeable that investors put up some resistance during the execution process – resulting in a final demand count of EUR5.15bn.

That after some investors pared back orders as Lufthansa (EUR1.15bn final book) cut pricing by 0.5% from yield IPTs on its first hybrid deal in over nine-years, whilst Evonik (EUR2.7bn final book) and Hera (EUR1.3bn final book) ramped in pricing 42bps and 39.5bps respectively during the execution process.

That saw the Hera deal price around 2bps inside where leads were pitching fair value, whilst fair value on the other two trades was difficult to pinpoint given the paucity of outstanding debt.

We stepped back on the accelerator again Thursday, with a further six raising a combined EUR4.6bn of what was economic funding for the borrowers.

That included La Poste (EUR750m PNC6.5) which became already the third corporate this year to launch a hybrid trade, whilst also emerging from the pipeline were SELP (EUR500m no grow 7yr; -2 NIC) and Ferrovial (EUR500m no grow 5yr; -3 NIC).

Joining those was opportunistic issuer Heathrow (EUR600m 11yr; 2bp NIC) which printed the first corp SLB of the year, as well as E.ON (EUR850m 8.25yr vanilla / EUR900m 15yr green two-part; 2/5 NICs) and Banque Stellantis France (EUR500m no grow 3yr; zero NIC).

The SELP and Ferrovial deals saw the some of the biggest cover ratios this week at 6.6x and 6.2x respectively, only beaten by the longer EUR500m 20yr line of Nestle’s two-part that could have been sold 7x over.

Summary of this week's EUR IG corp trades:

Mercedes opens up sterling market for 2025

Single currency supply was off the menu on US payroll Friday but making the most of the uncrowded market to kick off the year’s sterling corporate issuance was German automaker Mercedes-Benz Group AG.

The borrower extended its sterling curve with a new GBP300m (from benchmark) 3yr line which started out at mid-gilts +95 area IPTs before landing at +85, or with a NIC of around 23bps. That on demand which peaked at GBP690m.

Mercedes tapped the sterling market despite a turbulent week for UK assets amid an unpalatable mix of fiscal and inflation concerns which have driven the 10yr gilt yield as much as 35bps higher year-to-date and sent the pound tumbling, evoking memories of Liz Truss’s mini budget.

Pace likely to remain brisk

Given the success of this week’s trades, the expectation is that more issuers will be looking to print in the near future, with bankers we spoke to on Friday morning expecting next week to see a similar level of euro IG corporate supply to this one.

That said, whilst demand was strong and NICs versus existing curves were small this week, other issuers may take some persuading to print at a time where underlying rates are at long-term highs.

Whatever does come out next week is at this stage going to be opportunistic, where the public pipeline is currently empty.

There are no major European holidays or central bank decisions to interfere with funding plans next week, although the start of US bank earnings (Wednesday) could produce some headlines along with ongoing inflation/fiscal uncertainty.

Performance tracker of recent EUR IG/split-rated benchmark deals

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